This paper develops a model with multiple market locations in which the quality of intangible assets of firms, provided by management, determines the firms. performance. Despite an ex ante symmetry of potential entrants, the equilibrium assignment of heterogeneous managerial skills to firms tends to be asymmetric. This sorting outcome determines both the goods market structure at single locatio...

A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple NEG model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that re-locating to the big region is most attractive for the most productivity firms; this implies interesting results for empirical work and policy analysis. A ‘selection effect’ mean...

This paper studies the role of efficiency in a firm’s decision to contract out. Emphasis is on the heterogeneous nature of firms and when firms are only considering outsourcing to domestic suppliers. Firm-level data on Australian manufacturing reveal an ordering of efficiency between firms that contract out and those that do not, in which contractingout firms are on aggregate less efficient. Th...

In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, free trade optimality depends positively on the level of firm heterogeneity and negatively on transportation/adoption costs. The benefits from temporary protection depend on the level of backwardness: for a given mass of backward firms, the relative gains from protection increase with their qu...

This paper considers the private and public incentives for firms to merge in the face of foreign entry. We set up a standard linear Cournot model of competition within a country and consider the gains to two merging firms and to national welfare in a series of scenarios: homogeneous and heterogeneous firms with and without synergies from mergers. We look first at optimal domestic firm numbers f...

Based on the recent trade models of the Heterogeneous Firms Trade (HFT) model and the Quality Heterogeneous Firms Trade (QHFT) model, we classify export goods (at the HS 6-digit level of disaggregation) by quality and price competition. We find a high proportions of quality-competition goods for the major EU countries and lower proportions for Canada, Australia and China. However, the overlap o...

This study uses a unique firm-level dataset to examine how falling trade costs from 1993-2001 affected entry, exit, productivity, and exporting in the Korean manufacturing sector. We verify many of the predictions of recent heterogeneous-firm models of international trade. For example, falling trade costs reduced entry by new Korean firms, increased their probability of exit, and reduced the ma...

On an otherwise symmetric oligopoly market with stochastic demands for heterogeneous products firms can either hire an employee or partner or buy the required labor input on the labor market. Whereas the wage of hired labor does not depend on the realization of stochastic demand, the price of bought labor input reacts positively to product demand. We first solve the market by deriving the equil...

This paper considers equilibrium directed search with a finite number of heterogeneous workers and firms, where firms compete in direct mechanisms. Unlike previous findings, Nash equilibrium here does solve the problem of coordination failure. Restricting the match value function to be supermodular, and that firms use truthful strategies also imply positive assortative matching and decentralize...

Which firms find it optimal to integrate their input suppliers into the firm boundaries of control (vertical integration)? Which firms choose to expand their sourcing activities across the national border (offshoring)? This letter provides novel evidence on these questions based on a Spanish firm-level data set. We find that firms selecting into strategies of vertical integration and of offshor...